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The choice between market failures and corruption

The choice between market failures and corruption
The choice between market failures and corruption
Because government intervention transfers resources from one party to another, it creates room for corruption. As corruption often undermines the purpose of the intervention, governments will try to prevent it. They may create rents for bureaucrats, induce a misallocation of resources, and increase the size of the bureaucracy. Since preventing all corruption is excessively costly, second-best intervention may involve a certain fraction of bureaucrats accepting bribes. When corruption is harder to prevent, there may be both more bureaucrats and higher public-sector wages. Also, the optimal degree of government intervention may be nonmonotonic in the level of income
194-211
Acemoglu, Daron
65f934f6-a9af-44ad-bbbb-cd8308891ab5
Verdier, Thierry
87c483ea-f473-408f-9776-d0381cab6454
Acemoglu, Daron
65f934f6-a9af-44ad-bbbb-cd8308891ab5
Verdier, Thierry
87c483ea-f473-408f-9776-d0381cab6454

Acemoglu, Daron and Verdier, Thierry (2000) The choice between market failures and corruption. American Economic Review, 90 (1), 194-211.

Record type: Article

Abstract

Because government intervention transfers resources from one party to another, it creates room for corruption. As corruption often undermines the purpose of the intervention, governments will try to prevent it. They may create rents for bureaucrats, induce a misallocation of resources, and increase the size of the bureaucracy. Since preventing all corruption is excessively costly, second-best intervention may involve a certain fraction of bureaucrats accepting bribes. When corruption is harder to prevent, there may be both more bureaucrats and higher public-sector wages. Also, the optimal degree of government intervention may be nonmonotonic in the level of income

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Published date: 2000

Identifiers

Local EPrints ID: 33484
URI: https://eprints.soton.ac.uk/id/eprint/33484
PURE UUID: 510c6591-bc3e-4fda-953b-e5f5cef6e0d1

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Date deposited: 20 Jul 2006
Last modified: 15 Jul 2019 19:07

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